Rest of world gets sick of propping up Bush's deficit: "But some, such as Australia's top econocrat, Treasury Secretary Ken Henry, believes a dramatic crunch could come when the central banks of China and Japan decide to stop paying the bills for Greenspan and Bush. In June, Henry said America's budget and current account deficits amounted to a 'substantial risk for international financial stability'. If, or when, the rest of the world decides to stop funnelling the $US2 billion per working day that the US needs to pay for its spending, Henry says we're all in for 'an economic adjustment of major proportions'."

Henry's statement probably explains why Australia has quietly diversified its foreign exchange holding into euros. The US finances its military and its budget deficits by the Treasury issuing 'IOUs' to foreign countries. But if the US decides it cant or wont pay up, who is going to make them? The crunch will come when Europe and Asia finally become convinced that the US system of budget, trade and current account deficits is unsustainable. The Bush gang are doing their level best to convince everybody as fast as possible that it is unsustainable.

Rest of world gets sick of propping up Bush's deficit: "But some, such as Australia's top econocrat, Treasury Secretary Ken Henry, believes a dramatic crunch could come when the central banks of China and Japan decide to stop paying the bills for Greenspan and Bush. In June, Henry said America's budget and current account deficits amounted to a 'substantial risk for international financial stability'. If, or when, the rest of the world decides to stop funnelling the $US2 billion per working day that the US needs to pay for its spending, Henry says we're all in for 'an economic adjustment of major proportions'."

Henry's statement probably explains why Australia has quietly diversified its foreign exchange holding into euros. The US finances its military and its budget deficits by the Treasury issuing 'IOUs' to foreign countries. But if the US decides it cant or wont pay up, who is going to make them? The crunch will come when Europe and Asia finally become convinced that the US system of budget, trade and current account deficits is unsustainable. The Bush gang are doing their level best to convince everybody as fast as possible that it is unsustainable.